Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Is WestRock (WRK) A Suitable Stock For Value Investors Now?

By Zacks Investment ResearchStock MarketsFeb 13, 2020 09:30PM ET
www.investing.com/analysis/is-westrock-wrk-a-suitable-stock-for-value-investors-now-200507730
Is WestRock (WRK) A Suitable Stock For Value Investors Now?
By Zacks Investment Research   |  Feb 13, 2020 09:30PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put WestRock Company (NYSE:WRK) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, WestRock has a trailing twelve months PE ratio of 10.93, as you can see in the chart below:




This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.92. If we focus on the long-term PE trend, WestRock’s current PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.




Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 14.19. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.




However, we should point out that WestRock has a forward PE ratio (price relative to this year’s earnings) of 12.90, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, WestRock has a P/S ratio of about 0.58. This is significantly lower than the S&P 500 average, which comes in at 4.04 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.




If anything, WRK is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, WestRock currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes WestRock a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, its P/CF ratio (another great indicator of value) comes in at 4.24, which is better than the industry average of 5.27. Clearly, WRK is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though WestRock might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of C and a Momentum score of F. This gives WRK a Zacks VGM score—or its overarching fundamental grade—of C. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been disappointing. The current fiscal quarter has seen no estimates go higher in the past sixty days compared to three lower, while the fiscal full year estimate has seen one upward and four downward revisions in the same time period.

As a result, the current fiscal quarter consensus estimate has fallen by 7.5% in the past two months, while the fiscal full year estimate has decreased 3.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.

Bottom Line

WestRock is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among the bottom 5%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the industry has clearly underperformed the broader market, as you can see below:




So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>



WestRock Company (WRK): Free Stock Analysis Report

Original post

Zacks Investment Research
Is WestRock (WRK) A Suitable Stock For Value Investors Now?
 

Related Articles

Is WestRock (WRK) A Suitable Stock For Value Investors Now?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email